Friday, March 8, 2013

WOODIN | FDR's GOP Friend and Financier

Will Woodin, FDR's First Secretary
 of the Treasury
March 8, 2013–The President’s opponents savaged him and his Treasury Secretary for printing greenbacks overtime, for pushing the U.S. budget deficit sky-high, for lowering the value of the dollar. 

But the President inherited from his predecessor the mess he had to deal with–the bad loans, insolvent banks, and high unemployment. After his inauguration, the President told the truth:
Some of our bankers had shown themselves either incompetent or dishonest in their handling of the people's funds. They had used the money entrusted to them in speculations and unwise loans. […]  It was the Government's job to straighten out this situation and do it as quickly as possible. And the job is being performed.
This may sound a lot like Barack Obama in January 2009. But it was actually 80 years ago this month, and President, Franklin Delano Roosevelt, was speaking in the first of his famous Fireside Chats.

The man FDR picked as Treasury Secretary, William H. Woodin, was a truly fascinating railroad magnate, musician and collector of coins and etchings. He was a summer resident of East Hampton. He was called by FDR to Washington like Cincinnatus from his plow.

Who was Woodin? He was a lifelong Republican–in 1898 he ran for Congress, losing narrowly. In 1922 he was appointed Fuel Administrator by New York GOP Governor Nathan Miller. He made some Democratic friends when he was reappointed in 1923 by Miller’s Democratic successor, Governor Al Smith. He came to know and like both Governor Smith and Smith’s successor Governor Roosevelt. He supported Smith for President in 1928 and FDR in 1932. At crucial points in the runup to FDR's election, Woodin raised money for FDR, whose financial needs far exceeded his family wealth. A friend, living two blocks from FDR at 67th and Fifth Avenue in New York City, Woodin continued to call him “Governor” after FDR relinquished the governor's job and even after FDR was elected President.

Will Woodin lived for the first time in New York City when he was sent to New York Latin and the Woodbridge School (a prep school for Columbia) and then to the Columbia University School of Mines. He was born in the coal-and-steel hills of Pennsylvania, in Berwick, Pa., west of Wilkes-Barre, where his father and grandfather ran the Jackson & Woodin foundry that made railroad wheels and rolling stock. Will wanted to become a physician but was told to prepare to work in his father’s business. He dropped out of Columbia because of illness and then, instead of returning to Columbia, he married the daughter of a judge in Montrose, Pa.–Annie Jessup, later called by her family Nan.

Will had a great sense of humor. His new wife’s family included many strait-laced Presbyterians with missionary zeal. Down-to-earth Will couldn’t wait to puncture their self-righteousness. His granddaughter Anne Harvey Gerli recalls this story:
When cousins of Nan paid her a visit at “The Heights” in Berwick for the first time, the Woodins’ coachman picked them up at the Berwick train station and dropped them off at the front door to be met inside by Nan. The cousins then suggested to her that the Woodins might consider hiring a new coachman because he, ahem, reeked of alcohol, drove erratically and was rude. Will joined them later and expressed deep sympathy, but Nan was puzzled because they didn’t have a coachman. In fact the “coachman” was Will, dressed up, playing a trick on his proper new in-laws.    
His practical jokes overflowed out of the home. It was a great day in his family when after three years’ apprenticeship he could cast a wheel by himself in the Berwick foundry. His grandson Charlie Miner says that when Will was asked to show some visitors how he did it, he changed the mold. So when the cooling time was over, and the top was raised, it revealed not a shining railway wheel but instead a cast-iron frog.

Although he returned to the family anthill in Berwick, Will’s musical and writing talent disposed him to be a cricket. After leaving Columbia and marrying Annie Jessup, he voyaged to Europe and the Near East to report for the New York Herald and other papers on Ottoman Sultan Abdul Hamid II’s killing of Armenians, foreshadowing later mass killings. His granddaughter Ms. Gerli tells the story from Nan’s perspective:
Nan was jealous of Will’s love of music and resented his going off to Europe to play music with the gypsies. The family recalled him early because his father and the business were ailing. He dutifully hurried home to help out in the business and support his family.

William Woodin at the U.S. Embassy to Cuba, where he was selling 
railroad cars. Photo courtesy Anne Harvey Gerli, Woodin’s granddaughter.
The business conditions that generated the 1893 Panic and ensuing Depression doubtless played a part in the appeal for Woodin to come home. 

His love of music was genuine–he had a good musical ear and played the guitar and piano all his life, though he rebelled against his piano teacher and stopped taking formal piano lessons at 7. He composed several melodies that continue to be performed, including the FDR March played at the President’s rain-soaked inaugural.

His ability to entertain people empowered him as a railway-car salesman, and after a second-place finish in his race for Congress, Will Woodin threw himself into a huge number of mergers and acquisitions that resulted in the American Car and Foundry Company, based in New York City. 

ACF created the first steel railway car in 1904 and sold hundreds of cars to the London and New York City subway systems.

Woodin was assistant to ACF’s chief executive and replaced him when the CEO died unexpectedly in 1915. 

Successful and entertaining, he joined many clubs in the City and East Hampton, where he became President of the Maidstone Club in 1926-27, as well as the third Commodore of the Devon Yacht Club and the founding Chairman of East Hampton’s arts center, Guild Hall.

A popular father and grandfather, he composed music for “Raggedy Ann’s Sunny Songs,” with the lyrics supplied by his friend Johnny Gruelle, whose characters include "Little Wooden Willie". Will and Nan attended the Fifth Avenue Presbyterian Church and the East Hampton Presbyterian Church with their four children and their children. His grandson Charlie Miner tells this story:
I once asked him: “Grandpa, why do we have to sit up front?” “Because,” Grandpa answered, modestly, “I gave the church some money.” I asked him: “If we give more money, can we sit in the back?” Grandpa roared with laughter.
Woodin was a collector of drawings by Cruikshank and others. When Miner was 5 years old, he was staying with his grandfather and started to read one of the books in his collection. Grandpa objected: “Those are not to be read.” Young Charlie was puzzled: “What good are they, then?” After filling the air with explanations about rare engravings, Grandpa gave up and decided the joke was on him. “Maybe you’re right, Charlie.”

Woodin was a serious coin collector. In 1913, Woodin published with a co-author a significant numismatic reference work, The United States Pattern: Trial and Experimental Pieces. Woodin sometimes used his avocations to win new friends. Miner says that his Grandpa called on the King of Siam to sell some railway cars and was lectured beforehand on Siamese protocol, the importance of backing away facing the King, etc. But when the two of them had wrapped up their negotiations, they emerged arm in arm, the King entranced with Woodin’s knowledge of rare coins.

Overall, how did Woodin do as Treasury Secretary? The economic challenge was even greater than in 2009; unemployment was 25 percent in 1933. But public opinion was more ready for sweeping action, because the Pecora Commission had for a year been stirring up public sentiment against Wall Street.

As FDR noted in his Fireside Chat, hardly any banks opened the week of his Inauguration, because almost all states had imposed bank holidays. Banks just didn't have enough currency to pay out to panicked depositors.

Woodin’s first job was mechanical, manufacturing bank notes. He had to print $2 billion in greenbacks to restore liquidity. He kept the Treasury’s Bureau of Engraving and Printing presses working nonstop. The new bills were packed in trucks and delivered to the banks, with movie cameras filming. The film clip was sent to cinemas around the country. Woodin also sent out examiners to determine the solvency of each bank, beginning with the 250 cities with clearing-houses, prior to reopening the banks one by one.

On policy matters, Woodin was cheerleader for the New Deal’s programs for direct creation of public jobs and for the Glass-Steagall Act that created the wall around bank deposits and insured them. The deposit insurance portion (Rep. Henry B. Steagall’s half) of the law is still standing although Senator Carter Glass’s wall was regrettably disassembled brick by brick by a series of lobbyists on behalf of financial interests seeking to finance risky bets in a way that would ensure that Uncle Sam paid for any losses.   

The one major policy matter where Woodin disagreed at first with FDR was on devaluation of the dollar. FDR advocated devaluation. When FDR brought it up, Woodin would say “Oh no, not that again,” according to grandson Miner. But when FDR made it clear he decided to do it, Woodin worked to make it happen, while extracting an exemption for “rare or unusual” gold coins.

Constant stress and sleep deprivation set Woodin up for an illness that persisted into December and he resigned as Secretary as of the end of 1933. He died March 3, 1934, two days short of one year from the day he accepted FDR's call and was sworn in. Miner says the immediate cause of death would today be described as a strep throat, for which there was then no cure. His austere funeral service was held at Fifth Ave. Presbyterian, attended by the President, himself no stranger to the challenges of illness, called Woodin “a martyr to public service”. Woodin's body was then taken by train to his hometown of Berwick, where he was buried in the family mausoleum.

How did they do as a team, FDR and Woodin?

Neither FDR nor Will Woodin was an expert on bank liquidity or fiscal policy. But they both understood that the country had elected FDR to act, after a disastrous posture by Hoover of inaction in the face of rising market illiquidity. Both were creative people with instincts that were nurtured by years of executive decision-making. Their decisions during the First Hundred Days were crucial in setting the course for recovery over the first part of the Depression, through 1936. The anti-deficit hawks in 1937 pressed for budget reductions that temporarily reversed the progress that had been made in the previous four years, until FDR got back on track.

The instincts of FDR and Woodin were better than those of the institutional experts, the Federal Reserve, which in fact exacerbated inflation and cycles, or the Treasury staff, which pursued the largely discredited the contemporary “Treasury View” that fiscal policy is not an appropriate tool for tackling job creation or GDP growth.

The joint success of FDR and his Republican ally is a vindication of the American democratic system of putting elected non-experts and their trusted appointees in charge of the career experts. The non-experts are more likely in a crisis to keep their eye on the problem and its solution, rather than on battles for turf, agency budgets or someone's next job. As Woodin’s granddaughter Gerli put it in an interview with me:
Grandpa could deal with the bankers because he wasn’t one of them. He was a businessman. When J. P. Morgan lost his mink coat, Grandpa went shopping in second-hand stores for ratty old mink coats and sent several of them to Morgan with a note saying he thinks he “found” the man’s missing coat.
The message is: Put someone in charge of the Treasury who is a Main Street person, not a Wall Street person. Find someone who is politically aware but can cross the aisle to get a consensus. President Obama's appointment of Jack Lew, who has worked well with him in the White House, is a fine approximation.